Publication: Business Day Issued: Date: 2007-04-03 Reporter: Khulu Phasiwe

Denel’s Turkish Delight Sours on Rooivalk Flop

 

Publication 

Business Day
Date 2007-04-03

Reporter

 Khulu Phasiwe

Web Link

www.businessday.co.za

 

SA arms group loses $2bn deal vital to future of attack helicopter

Embattled arms manufacturer Denel has been passed over for a lucrative $2bn contract to supply the Turkish army with attack helicopters, a deal that was seen as critical to the company’s turnaround efforts and to the long-term commercial future of its Rooivalk aircraft.

Instead, the contract to supply Turkey with 50 attack helicopters was awarded on Friday to Italy’s Agusta Aerospace.

Winning the tender would not only have helped to turn Denel around, but would also have ensured the survival of its much-vaunted Rooivalk, analysts said.

Denel CEO Shaun Liebenberg was last year quoted as saying that the Turkish deal was “probably the best opportunity we’ve ever had with Rooivalk”.

“The future of our helicopter capability is dependent on this deal.”

But Liebenberg said on Friday that Denel had not accounted for any Rooivalk revenues into the parastatal’s budget for the future due to the high risks associated with such tenders.

“This outcome would therefore not have a direct impact on our current financial position, and Denel’s change strategy on which we have progressed well over the past year is on track.”

Despite concerns that the technology used on the Rooivalk was becoming outdated, which may have led to the helicopter’s failure to win the tender, Liebenberg said the Rooivalk was still a “world-class helicopter on par with the best available anywhere”.

He said Denel would continue to seek other business opportunities in Turkey.

“This is certainly not the end of the road.

“Over the many months of working there, we have taken the opportunity to explore many other business options with Turkey,” said Liebenberg.

“We are looking at collaboration with Turkish industry in areas like missile development, munitions, artillery technology and land mine clearance.”

Denel spokesman Sam Basch said yesterday that the state-owned company was also in discussions with the South African defence department in an effort to sell more Rooivalk helicopters to the South African Air Force.

To date, only the South African Air Force has bought the Rooivalk. The air force acquired 12 attack helicopters in 1999.

Liebenberg said recently that he was confident that the parastatal would be turned around in the next four years.

He said the company had managed to reduce its net loss by R183,3m to R1,4bn in the 2005-06 financial year *1.

The previous year’s net loss was R1,6bn *1.

“The total re-engineering of Denel is now well under way, and although a lot remains to be done, I am confident we have set in motion a process to drive internal improvements across all business units,” said Liebenberg.

“We have taken a hard look at viability in each business, including potential for partnering, and also improvements in processes, cost reductions and new skills.

“We’re clearly on the road to improved fortunes.”

Denel had regained solvency, and has a healthy capital and reserves margin of R600m ­ thanks to a R2bn cash injection by government *1.

Denel has asked government to recapitalise it with R5bn.

Denel’s chief financial director, Talib Sadik, said recently that the company would generate R450m from the disposal of its eight noncore business units and a further R600m from the sale of its excess land.

Meanwhile, German firm Carl Zeiss Optronics last month acquired 70% of Denel’s optical and laser equipment manufacturing unit, Denel Optronics.

Denel would retain intellectual property rights in all the deals.

With acknowledgements to Khulu Phasiwe and Business Day.


*1       Wow.

This is purely the result of government's decision to buy overseas at all costs.

The reason : foreign (European) armaments manufacturers pay big bribes to secure their business.

South African companies either do not do so for ethical reasons, (other than Denel which also pay bribes), or cannot afford to do so. Denel can afford to do so because it uses taxpayers' money to stay alive.